Published 24 January 2024
Transitional measures proposed as rent cap ends.
Regulations to protect tenants concerned about rent increases following the ending of the emergency rent cap have been laid in the Scottish Parliament.
From 1 April onwards, subject to parliamentary approval, the process for rent adjudication will temporarily be modified for one year.
Any tenant who wishes to dispute a rent increase notice can apply for rent adjudication. In such cases, Rent Service Scotland or the First-tier Tribunal will set rent based on the lowest of the following three figures:
- the open market rate
- the rent requested by the landlord
- and a comparator based on the difference between the market rate and current rent
Background
The Cost of Living (Tenant Protection) (Scotland) Act 2022 (Saving Provisions) Regulations 2024
The Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024
The temporary rent cap and eviction moratorium protections brought in by the Cost of Living (Tenant Protection) Act 2022 will no longer apply from 1 April 2024. This final date is built into the legislation and cannot be extended further. Until then, private rents are capped at 3% – or 6% in exceptional circumstances. The protection applies to all applicable Rent Increase Notices issued on or before 31 March 2024. The extra eviction protections will also come to an end at this point.
If a tenant is concerned about the level of a proposed rent increase, they can raise it with their landlord or agent and apply to a rent officer at Rent Service Scotland, or to the First-tier Tribunal if applicable, for a rent adjudication.
The regulations would temporarily modify the rent adjudication process for 12 months so that on making a decision on adjudication, the rent officer would use a rent taper formula which can be summarised as below:
- If the gap between the market rent and the current rent is 6% or less, then the landlord can increase the rent by the proposed amount, as long as this is not more than the market level.
- If the gap between the market rent and the current rent is more than 6%, the landlord can increase the rent by 6% plus an additional 0.33% for each percent that the gap between the current rent and market rent exceeds 6%, as per the formula set out in the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024. However, the total rent increase cannot exceed 12% of the current rent.
- Both cases are also subject to the requirement that RSS and the FTT cannot set a higher rent than that requested by the landlord.
Illustrative Worked Examples
Below are a selection of illustrative worked examples of the approach that would apply under the Rent Adjudication (Temporary Modifications) (Scotland) Regulations 2024. They present different hypothetical scenarios of rent increases under the proposed approach, illustrating how the taper approach would apply where the difference between current rent and open market rent is between 6% and 24%. Each example considers what would happen were a tenant to refer a rent increase for adjudication.
Example 1
- A landlord sets a new rent which is 5% higher than the current rent. The landlord believes the difference between current rent and the open market rent is 5%. Rent increases up to and including 6% are permitted, as long as the new rent does not exceed the open market value. If the tenant took the case to rent adjudication and the open market rent value was confirmed at this 5% level or above, then the rent increase of 5% would be approved. If the rent adjudication concludes the open market rent is lower than the rent proposed by the landlord, rent would be set at the open market level.
Example 2
- A landlord sets a new rent which is 8% higher than the current rent. The landlord believes this 8% increase would bring the rent up to the open market value. Rent increases are subject to the taper approach if the proposed rent increase is above 6% of overall rent. If the gap between the current rent and open market rent is 8%, then the rent increase would be capped at an increase of 6.7% higher than existing rent.
Example 3
- A landlord sets a new rent which would be 15% higher than the current rent. The landlord believes the open market value is 25% above the current rent. Rents cannot rise by more than 12%. If the gap between current rent and open market rent is more than 24%, rent increases are capped at 12% higher than existing rent. If the tenant took the case to rent adjudication and it was confirmed that the open market value was 24% or higher than the current rent, then the rent increase would be set at an increase of 12% higher than existing rent.
Example 4
- A landlord sets a new rent which is 15% higher than the current rent. The landlord believes the open market value is 15% higher than the current rent. Rents cannot rise by more than 12%. If the gap between the current rent and the open market rent is 15%, then the rent taper formula is applied and the rent increase is capped at 9% higher than existing rent. If the tenant took the case to rent adjudication and it was confirmed that the open market rent was 15% higher than the current rent, then the allowable rent increase would be set at 9% higher than existing rent.
https://www.gov.scot/news/continuing-rent-protection-for-private-tenants/
